Mastering GFR 2017 (Part 2): The Money Plan (Chapter 3)
⚠️ Educational Disclaimer
This content is for educational purposes only. While we've prepared this series based on the General Financial Rules (GFR) 2017 (Updated 31st July 2025), please note that:
- This is a simplified interpretation of GFR 2017 for examination preparation
- Errors or omissions may occur despite our efforts to ensure accuracy
- For official, authoritative information, always refer to the official GFR document
- Neither the author nor the website assumes responsibility for any damages, losses, or consequences arising from reliance on this content
- Always verify critical information with your department's official channels before implementation
Introduction
Welcome back to our series on mastering the General Financial Rules! In Part 1, we covered the basic definitions and the all-important Canons of Financial Propriety. Now, we get into the heart of government operations: Chapter 3, Budget Formulation and Implementation.
This chapter is the "life cycle" of government money. It explains:
- Formulation: How is the money plan (Budget) created?
- Implementation: How is the money given out?
- Control: How is the spending managed and kept in check?
This chapter is a favorite for examiners, so let's dive in.
Section 1: Budget Formulation (The Plan)
This section covers the rules for creating the Union Budget, which is the "Annual Financial Statement" presented to Parliament.
The Basics
- Financial Year: This is the period from 1st April to 31st March.
- Budget Contents: The budget must show estimates of all revenues, all expenditures, and all debt/loan charges for the financial year.
- Demands for Grants (DGs): This is the document that the Lok Sabha votes on. Generally, one DG is presented for each Ministry or Department.
This is a fundamental concept and a guaranteed exam question. All expenditure from the Consolidated Fund is divided into two types:
1. VOTED Expenditure (Rule 50)
- What it is: These are expenditures that are submitted to the vote of the Lok Sabha.
- Example: Your salary, office expenses, funds for a new project.
- The Rule: The Lok Sabha can approve, reduce, or refuse a "voted" demand. It cannot increase it.
2. CHARGED Expenditure (Rule 50)
- What it is: This expenditure is also paid from the Consolidated Fund, but it is not voted on by Parliament. It is a "must-pay" liability of the government.
- Example: Salary of the President, Speaker, Supreme Court & High Court Judges, and—most importantly—interest payments on government debt.
- The Rule: This expenditure is only discussed in Parliament, not voted on.
🧠 Easy Way to Remember: Voted vs. Charged
VOTED = You VOTE on it. (Optional spending)
CHARGED = It is CHARGED to the account. (Non-optional/mandatory spending)
What it is: The full budget process (presentation, discussion, and passing the Appropriation Bill) takes time. But the government needs money to run on 1st April. A "Vote on Account" is an advance grant passed by Parliament to cover the government's estimated expenditure for a brief period (e.g., a few months) until the full budget is passed.
The Golden Limitation: Funds from a Vote on Account cannot be used for expenditure on a 'New Service'. It is only for continuing existing services.
What it is: This is a modern budgeting tool. It links the money (Outlay) to the results (Outcome).
Why it matters: It shifts the focus from just "how much money we spent" to "what did we achieve with that money?". The budget for a scheme is linked to measurable outputs and deliverables.
Section 2: Control of Expenditure (The Execution)
This is the most practical part of the chapter for all DDOs and HODs. It's about how to spend money after the budget is passed.
The Three Golden Rules of Spending (from Rule 57)
- Purpose: A grant can only be used for the purpose for which it was given.
- Time: A grant can only be used during the financial year for which it is sanctioned.
- Amount: You can never spend more than the total grant authorized by Parliament.
Two rules are extremely important here. Violating them is considered a serious issue.
1. Rush of Expenditure (Rule 62(3))
What it is: Spending a large amount of money in the last few months of the financial year (especially March) just so the funds don't "lapse".
The Rule: GFR calls this a "breach of financial propriety" and states it "shall be avoided". This implies poor planning.
2. Surrender of Savings (Rule 62)
What it is: If you know you are not going to use your allotted funds, you can't just sit on them.
The Rule: All anticipated savings must be surrendered to the Government immediately when they are foreseen. You cannot hold savings in "reserve" for possible future excesses.
Section 3: The "Money Shuffle" (Adjusting Your Funds)
This is the most-tested part of Chapter 3. What do you do when you have too much money in one budget head and not enough in another?
🧠 Easy Way to Remember: The 3 Ways to Get More Money...
Think of your budget as a set of envelopes ('Salary', 'Rent', 'Groceries').
| Method | GFR Rule | What it is (Simple Analogy) | Key Limitation |
|---|---|---|---|
| Re-appropriation | Rule 65 | Moving money between your own envelopes (e.g., Taking from 'Groceries' to pay for 'Petrol') | Can only be done within the same grant. Cannot move money between 'Voted' and 'Charged' sections. |
| Supplementary Grant | Rule 66 | Asking the boss (Parliament) for more money | This is what you must do for a 'New Service' not in the original budget. |
| Advance from Contingency Fund | Rule 67 | Taking an emergency loan from the President's fund | For unforeseen expenditure only, when Parliament isn't available. Must be paid back after getting a Supplementary Grant. |
1. Re-appropriation (Rule 65)
This is the most common adjustment. It is the transfer of funds from one primary unit of appropriation (like an object head) to another within the same grant.
Who does it: A competent authority (like your HOD or Ministry) can do this.
Key Limits:
- You can't do it to/from the "Charged" section.
- You can't move money from "Capital" to "Revenue" sections.
- You can only re-appropriate funds when it is known that the money will not be used in the original unit (you can't just "park" funds).
2. Supplementary Grant (Rule 66)
This is what you do when re-appropriation isn't possible, or the total grant is not enough. You go back to Parliament and ask for more money. This is the only way to fund a 'New Service' (Rule 63), which is an expenditure not contemplated in the original budget.
3. Advance from Contingency Fund (Rule 67)
When: When a need for unforeseen expenditure arises (e.g., a natural disaster).
Why: There is no time to get a Supplementary Grant from Parliament.
The Catch: This is a temporary advance. The Ministry must go to Parliament at the first opportunity to get a Supplementary Grant to "recoup" or "repay" the advance to the Contingency Fund.
Summary of Part 2
You've just covered the entire budget life cycle! The key takeaways are:
- Budgeting: Know the difference between Voted and Charged expenditure and the purpose of a Vote on Account.
- Spending: Never "rush expenditure" in March and always "surrender savings" as soon as you find them.
- Adjusting: Understand the 3 "Money Shuffles": Re-appropriation (moving your own money), Supplementary Grant (asking for more), and Contingency Fund (an emergency loan).
Series Navigation:
← Part 1: The Foundations | Part 2: The Money Plan | Part 3: The Record Keeping →
Coming Up Next...
In Part 3, we'll cover Chapter 4: Government Accounts—the nuts and bolts of how the money is actually tracked and recorded.
About This Series: This is Part 2 of a comprehensive 7-part series on GFR 2017 for government employees preparing for departmental exams. Each part covers specific chapters with exam-focused concepts, case studies, and memory tricks.
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